Judge orders Zeek affiliates to turn over documents

A federal judge is ordering four affiliates of the Lexington-based alleged Ponzi scheme, Zeek Rewards, to turn over documents related to the program.

BY NASH DUNNThe Dispatch

A federal judge is ordering four affiliates of the Lexington-based alleged Ponzi scheme, Zeek Rewards, to turn over documents related to the program.Court-appointed receiver Kenneth Bell subpoenaed David Sorrells, Dave and Mary Kettner, and Robert Craddock in late October 2012. They all participated in Zeek Rewards as affiliates of the penny auction-based program, with Sorrells and the Kettners making a combined about $1.94 million through the alleged scheme, according to court documents.The four affiliates almost immediately objected to the content, form and service of the subpoenas, calling the requests for documents and a fund surrender "overbroad." On Thursday, U.S. District Judge Graham Mullen granted Bell's motion compelling the affiliates to turn over any documents reflecting financial transactions, work contracts and other communication with Zeek Rewards, its parent company, Rex Venture Group, and related penny auction site Zeekler.com.The U.S. Securities and Exchange Commission shut down Zeek Rewards and Rex Venture on Aug. 17, alleging that the company was operating one of the densest Ponzi and pyramid schemes in recent history. The SEC alleged that the company and its former chief executive officer, Paul Burks, a Lexington resident, raised more than $600 million from about 1 million users through the sale and offer of unregistered securities.Bell was appointed to recoup as much money tied to the company as possible to return to what's estimated at 840,000 affiliates who lost out. One of the ways he's doing that is targeting about 77,000 affiliates who made money with Zeek Rewards.The Kettners and Sorrells were three of about 1,200 Zeek Rewards profiteers who received subpoenas in 2012. Documents were also sought from Craddock and his company, Fun Club USA, Inc., which Bell believes has relevant information concerning Rex Venture.The court's order gives the affiliates 30 days to produce documents reflecting: • Any money the affiliates paid to Rex Venture, including monthly subscriptions to Zeek Rewards, bid purchases and money paid for compliance courses.• Money received from Rex Venture.• Any work or other assistance done for or provided to Rex Venture as an employee, independent contractor, vendor or agent.• Promotional or recruitment, describing compensation plans, income opportunities, operations, subscription programs or affiliate obligations of Zeek Rewards and Zeekler.com.During a web conference call, Bell, who has collected about $300 million in Zeek assets so far, said he will have to file clawback litigation against some profiteers. Bell is scheduled to submit his final liquidation plan by the end of the month, which may include a proposed claims process to the courts. Once that process is approved, which Bell said could take several months, affiliates and vendors who lost money will make their claims online. While the receivership team is still working out who will be eligible for reimbursement, Bell said those who purchased bids, bought subscriptions and made penny auction purchases that were not fulfilled will most likely to be paid back.Bell does not expect most affiliates will recoup all of their initial "investment" into Zeek Rewards.Nash Dunn can be reached at 249-3981, ext. 227, or at nash.dunn@the-dispatch.com.